Risk On Muffled:

When the Nasdaq is leading major benchmark, it is a good sign that market participants are feeling somewhat jovial. Of course the tech heavy index represents more “speculative” names per se. On the ratio chart below, comparing to Nasdaq to the S&P 500, one can get the genuine feeling that investors were in a cheery mood. A gentle pullback is what bulls want to see after a healthy run, but an erratic, rapid love lower could be a sign that this may be no ordinary weakness. I am not calling for any meaningful downdraft here, but better entry levels in the technology arena can most likely be had heading into the summer doldrums.

Software Softening Continues:

The software group has not only been the strongest sub sector within technology, but overall as well. One can take cues from its price action, and it is still early but in the last 6 weeks it has made three lower lows. Of course this is after a long, pronounced uptrend so some back and filling would be expected. The 50 day SMA of the IGV, looks like it wants to slant lower for the first time in 2019, and some real leaders in the arena have produced some dubious candlesticks at all time highs. They include best of breed players, TTD and COUP which recorded gravestone doji candles on Monday. When the top performing group in technology is delicate, it sends a clear message to be small.

Examples:

It is always a good practice to pay attention to how leaders are acting in a particular group. If it happens to be one of the most important sectors, then the message it sends could be even more compelling. Below is the chart of BRKS and how it appeared in our 6/10 Technology Report. We were WRONG about this name (38.40 stop not taken out on a CLOSING basis), and a quick reversal after the 40.31 cup base pivot taken out on 6/10 is a red flag. Tuesday recorded a bearish engulfing candle at decade plus highs, and Wednesday followed through lower. When the generals speak always listen.

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